Scribd
Upload
509 views

Lecture Notes - 3 - CT4

This document discusses survival models and concepts from contingency theory such as mortality rates, force of mortality, and life tables. It defines key terms like lifetime T, future lifetime after age x (Tx), force of mortality (μx), and probability of surviving from one age to another (tpx). Examples of models for mortality like Gompertz and Makeham are provided. The document also discusses approaches for handling non-integer ages in a life table, including assuming a uniform distribution of deaths or constant force of mortality between integer ages.

Uploaded by

Srinivasan Subramanian
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
509 views

Lecture Notes - 3 - CT4

This document discusses survival models and concepts from contingency theory such as mortality rates, force of mortality, and life tables. It defines key terms like lifetime T, future lifetime after age x (Tx), force of mortality (μx), and probability of surviving from one age to another (tpx). Examples of models for mortality like Gompertz and Makeham are provided. The document also discusses approaches for handling non-integer ages in a life table, including assuming a uniform distribution of deaths or constant force of mortality between integer ages.

Uploaded by

Srinivasan Subramanian
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 17

A quick digression to CT4...

In CT4 'Survival Models' are covered

Survival models deals with modelling the underlying

mortality
This subject, Contingencies, deals with valuing

payments contingent on underlying mortality (and


on underlying interest rates) assuming that the
mortality and interest rates are known
Life table approach is only one way of getting to the

mortality
Lecture Notes 3

CT4... definitions assumed


We define T to be the future lifetime of a newborn

T is continually distributed on [0,] 0<<

Little Omega () is the limiting age

We define Tx to be the future lifetime after age x,

for a person aged exactly x; 0<x<

Lecture Notes 3

CT4... definitions assumed


Now, Tx means the person has already reached x

So, P[Tx<t] has to be a conditional probability

Lecture Notes 3

CT4... definitions assumed


We now want to work with the pdf of Tx

Lecture Notes 3

CT4...Force of Mortality
Where we define the force of mortality at age x by x

x is the instantaneous mortality rate the 'continuous

version' of qx.. For small h:

Lecture Notes 3

CT4...Force of Mortality

Lecture Notes 3

CT4... t px and tqx

Lecture Notes 3

Life tables - (mu)x


1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0

3
0

9
6

15 21 27 33 39 45 51 57 63 69 75 81 87 93 99 105 111
12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 102 108
Age

Lecture Notes 3

Life tables - (mu)x - on a log(10) scale


1.0000

0.1000

0.0100

0.0010

0.0001

0.0000

3
0

9
6

15 21 27 33 39 45 51 57 63 69 75 81 87 93 99 105 111
12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 102 108
Age

Lecture Notes 3

Examples of models of mortality


Gompertz:

x = B cx

Makeham:

x = A + B cx

Lecture Notes 3

10

Life tables - tp0 . mu(t)


0.040
0.035
0.030
0.025
0.020
0.015
0.010
0.005
0.000

3
0

9
6

15 21 27 33 39 45 51 57 63 69 75 81 87 93 99 105 111
12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 102 108 114
Age

Lecture Notes 3

11

CT4... definitions assumed


So, given the pdf of Tx we can calculate E[Tx]

(and of course E[f(Tx)])!


E[Tx] is denoted in actuarial notation by

Lecture Notes 3

12

CT4... definitions assumed


Now consider Kx

E[Kx] is denoted in actuarial notation by ex

Lecture Notes 3

13

Back to the life table

Lecture Notes 3

14

Life table: non integer ages

First, split the function out so that the non-integer

ages span less than one year (each)


Now we have two options

Uniform Distribution of Deaths, or

Constant Force of Mortality

Lecture Notes 3

15

Uniform Distribution of Deaths


For integer x and 0t1, t px x + t is constant

As this is the pdf of the time to death from x, this

means that it's a uniform distribution between


integer ages hence Uniform Distribution of Deaths
Mathematically, sqx = sqx for 0s1

Lecture Notes 3

16

Constant Force of Mortality


For integer x and 0t1, x + t is constant

Lecture Notes 3

17

You might also like